On this blog I have chronicled how I have been trying to right my financial ship over the past two years or so. I bought a house, save for retirement, and try to pay off as much debt as I can. I have stated that one of my goals is to pay off all of my consumer debt by the time I am 45. Moreover, I have expressed strong feelings about student loan forgiveness and the like. Personally, I feel a little guilty if I were to take student loan forgiveness because I knew what I was doing. I took out those loans. No one duped me and to have the government forgive part of it seems a little underhanded.
That said I am also a person that plays monetary mental gymnastics with myself. I promise a blog post on the various lessons that I have learned in writing this blog, but one of them is that I am constantly trying to tweak my plan, which is probably a bad thing. I just need to stick with it. That tweaking led me to this post.
Before I met Mrs. ROB I was never eligible for a student loan plan that would be based upon your income. What I did was a choose an extended payment plan, which lowered my payment by half, but extended the loan by an additional 15 years. Ironically, if I would’ve kept my original payment schedule I would be done paying my loans this year, but I don’t know if I could’ve kept up with the $1000 payment per month.
Anyway that is neither here nor there. Mrs. ROB has student loans and between the two of us we now both qualify for income-based payment plans. Mrs. ROB has been on an income-driven plan for the past two years. I have, for whatever reason, chosen to just continue with my normal plan up until a few months ago.
About four months ago I decided to switch. I went from my regular extended payment plan to one based upon income. My payment actually was only lowered by about $50, but because of this plan I was now available to apply for the public service loan forgiveness program.
What is PSLF?
The public service loan forgiveness program is designed for people who work in jobs in the public sector (e.g. non-profits, schools, government work, etc) and who are expected to not make that much money. What happens is that you have to be income-eligible for PSLF, which means you have to get on one of the income based repayment plans the government offers. The newest program is called REPAYE. Because there are so many different income based student loan plans they have tried to consolidate some and come up with a different plan. I won’t go into too much detail, but just know that REPAYE is the new all-encompassing one for all borrowers because the original Pay As You Earn (PAYE) was only for recent college graduates and not for people like me who have been paying on their loans for a long-time. Accordingly, the Department of Education created a new plan (REPAYE) that encompasses student loan borrowers who have been paying for a while.
The benefits of REPAYE are that it caps your payments at 10% of your income and forgives the loans after 20 years, but that is still 20 years of payments. For the PSLF, you have to be enrolled in an income based payment plan every year for the next 10 and they will forgive your loans after 10 years. In essence, I could have my loans forgiven after about 8 more years of student loan payments.
By my calculations my loan forgiveness total will be about $25-$30,000.
Why Join PSLF?
But for long-time readers of this blog you might ask :”well how this work if you are trying to pay off all of your debt by 45 or by 50 with the mortgage? And what about your opposition to loan forgiveness?”
All good questions.
And I am not sure I have good answers. I joined PSLF for a couple of reasons.
- I was curious as to if I would be eligible for PSLF and how long my forgiveness period would be. You only receive loan forgiveness from PSLF if you have been paid 120 loan payments, are enrolled in a income-based program, and work in a job that qualifies for the program for 10 years. Well, I have 110 payments made (and never missed one), I enrolled in the income-based repayment this year, and I have been at my PSLF eligible job going on 10 years (and have no plans to leave) However, I haven’t been part of the program for more than a few months. I am not sure when/if the PSLF will kick in.
- I wanted a little more breathing room for debt. With the PSLF program I did lower my income payments by a little bit. It isn’t much, but I am motivated to pay off my second mortgage and every little bit helps. The only bad thing is that every year I have to reapply for the program and so my payments will change from year to year.
- The truth is I am now a bit conflicted on loan forgiveness. While I still think it may be a bad idea for me I also have to think about the math. What is the best mathematical decision for my family? Mathematically, it might be best for me to do the loan forgiveness instead of paying off the loans in however years it takes. That said I feel ethically conflicted. I mean I took out the money. I knew what I was doing. Shouldn’t I pay back the whole loan? Shouldn’t I be responsible for my actions? At the same time, I have been accused of being financially stupid if I don’t do it. I am not sure what to do. In the interim I have decided to enroll in the program and see where it goes. I don’t know how long I have to pay in order to get the forgiveness, if at all. I supposedly will get that info in the next few months.
The Bottom Line: I feel kind of like a hypocrite for doing this because I was personally against this for me. In some respects I still am. I just feel a bit unethical on this. One thing this does say is that I am constantly growing (perhaps not for the better) on this financial journey. What do you all think?